Only a few companies have so far opted out of issuing PRNs next year despite prices for packaging recycling evidence hitting rock bottom.
According to the Environment Agency, 132 reprocessors and 89 exporters have applied for PRN accreditation for 2011. This is broadly comparable to the 139 reprocessors and 89 exporters who had applied for accreditation at the same time last year for 2010.
This means that many companies, who wanted to ensure they were accredited before January 1, would have registered without realising that demand for PRNs would plummet, pushing prices down to new lows.
As a result, any impact on accreditation application numbers is expected to be felt as 2011 progresses, and it will be interesting to see whether the number accredited rises to the levels seen by the end of 2010 – when a total of 162 reprocessors and 108 exporters were accredited. It is also expected to affect applications for accreditation in 2012.
Edward Cooke, director of compliance scheme Compliance Link, told letsrecycle.com: “I think most people thought the target would go up and you will see far less people registering for 2012”.
Thomas Rickerby, senior markets operator at the Environment Exchange PRN trading platform (t2e), said: “I think 2011 is a make or break year for some people. If there is going to be any kind of revolt against the PRN system we are not going to see it until next year.”
Mr Rickerby added that the Agency was tightening up the system of accreditation which “required more boxes to be ticked” which, although a positive move, was also putting some companies off.
Trend
Despite this trend, however, Mr Rickerby said that it was generally the smaller reprocessors and exporters which were likely to pull out of the PRN system and that he expected larger companies which accounted for the majority of PRNs to stay on board.
He said: “A couple of our smaller sellers are not going to bother getting accredited next year. But they won't make or break the PRN market. All the major companies have their accreditation in.”
Mr Rickerby added that, while companies often said they may withdraw from the PRN system, in practice many did not because it would only take a few large companies to pull out for prices to shoot up and they would lose out on this benefit.
He said: “There is always the fear that, if a few big companies fall out of the system, prices might rise and they might miss out. People are always saying they will pull out but when it comes to the crunch they don't.”
This opinion was echoed by Duncan Simpson, sales and marketing director at producer compliance scheme Valpak, who said that the companies he had been in discussions with were not withdrawing from the system.
He pointed to the fact that the government may still raise the packaging recycling targets after 2012 and that it may be unwise to pull out, because of the potential rewards involved and the need to keep staff trained.
He said: “The companies we have been talking to still want to participate and have taken steps to do that. It's better to be accredited and have the opportunity to get that revenue flow than not to be.”
Basic
Mr Cooke said the figures could also be explained by the fact that many reprocessors and exporters would apply for the basic level of accreditation which allows them to issue up to 400 PRNs at a cost of £505 and upgrade only if the market picked up. If companies wish to issue more than 400 PRNs they have to pay the much higher fee of £2,616.
He said: “A lot of people have said they will pay the smaller producer fee and see how the market gets on. All you do to upgrade is pay the extra money.”
In 2008, the Environment Agency warned of a ‘substantial loss' of PRN capacity after the number of exporters and reprocessors applying for PRN accreditation fell. At the time, this was linked to low PRN prices earlier in the year (see letsrecycle.com story).
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